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THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN

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Commence a Pension from the Dalhousie Plan. Deferment of a Pension ... 60 DAYS. NOT VESTED. VESTED. PROCESSING NOTICE. PRIOR TO TWO YEARS MEMBERSHIP ... – PowerPoint PPT presentation

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Title: THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN


1
THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN
  • Pension Plan Information Session
  • Presented by Lee Crowell, Dalhousie University
  • May 7, 2008

2
Plan Options
  • Commence a Pension from the Dalhousie Plan
  • Deferment of a Pension
  • Transfer Entitlement to an RRSP

3
Definitions
  • Commuted Value Present Value (Lump Sum) of the
    pension a Member has accrued in the Dalhousie
    Plan.
  • SOCC The value of a members and employers
    contributions to the Plan plus accumulated
    interest.

4
Definitions (Contd)
  • Unlocked Funds 100 of the vested contributions
    made prior to 1977 and 25 of the Commuted Value
    of the benefits earned between 1977-88.
  • Type II Pension Options Provide survivorship to
    spouse pension is reduced if either member or
    spouse dies.

5
Definitions (Contd)
  • CRA Transfer Maximum The amount of pension
    entitlement which can be transferred to an RRSP
    from a defined benefit pension plan. This amount
    is the product of the accrued pension and a
    factor provided by the CRA.

6
Dalhousie Pension
  • Characteristics of a DB Plan
  • Benefit is based on a formula
  • Contributions are adjusted periodically
  • Pension plan is regulated both federally and
    provincially
  • Financial risk is borne by the Plan Sponsor

7
Dalhousie Pension
  • Best Average Earnings Formula
  • 2 x best three consecutive years average salary
    x pensionable service
  • Contributions
  • 4.65 of first 5,000 of salary, 6.15 of balance
    of salary to maximum
  • Maximum 35 years contributing to the Plan

8
Maximum Pension Benefits
  • 2008 Maximum Pension 81,655/yr and Pensionable
    Salary 116,650
  • 2009 Maximum Pension 85,540/yr and Pensionable
    Salary 122,200
  • Future Years - Increase is the increase in the
    average industrial wage

9
Early Retirement Benefits
  • Reduction Factors
  • For each year between age 55 and normal
    retirement the pension is reduced based on an
    adjustment factor

10
Optional Payment Forms
  • Lifetime Pension for the members life
  • The Plan provides other options at retirement to
    suit your circumstances (e.g. JS 75, JS 100)
  • Certain guarantees can be added (E.g. a minimum
    number of guarantee payments or an ongoing
    pension to your spouse, should they survive you)

11
Optional Payment Forms (Contd)
  • Life 10
  • Example pension of 2,000 per month
  • Paid for your lifetime and ceases upon death
  • What if death occurs before payments have been
    made for 10 years?
  • Balance of remaining payments to beneficiary

12
Optional Payment Forms (Contd)
  • JS 66 2/3 (guaranteed 5 years), Type I
  • Pension paid for your lifetime
  • Death of pensioner?
  • Surviving spouse at time of retirement receives a
    survivors pension equal to 66 2/3 of Members
    payments.
  • What if death of both spouses occurs before
    payments have been made for 5 years.
  • Balance of remaining payments to beneficiary

13
Optional Payment Forms (Contd)
  • Dalhousie also offers a Type II pension
  • Amount continuing to Member or spouse is the
    same, regardless of who dies first
  • Example, Type II with 75 continuance
  • Initial pension - 2,000/month
  • Reduces on death of either the Member of the
    spouse to 1,500/month

14
Optional Payment Forms (Contd)
  • Base pension for a Member retiring at NRD after
    25 years (22 yrs. Before June 30/04, 3 yrs.
    after) with BAS of 38,000 is 19,000 p.a.
  • Amount of actual pension depends on level of
    guarantees following are samples of options
    available (assumes spouse is same age)

15
Optional Payment Forms (Contd)
  • Pension law requires that you provide a minimum
    60 survivorship to your spouse.
  • We recommend that the Plan member consult with a
    financial advisor before deciding what optional
    pension to choose.

16
Survivor Options
  • Normal Forms
  • In respect of service to June 30, 2004
  • Single life guaranteed 10 years
  • Married Joint Survivor 66?, guaranteed 5
    years
  • In respect of service from July 1, 2004 onwards
  • Life guaranteed 7 years (whether single or
    married)

17
Retirement Age
  • Early Retirement prior to Normal Retirement Date
  • As early as age 55
  • Normal Retirement Date
  • July 1st following your 65th Birthday

18
Early Retirement Example
  • Retirement at age 60 with 20 years of employment
  • Based on Adjustment Factor Table, pension reduced
    by a factor of
  • .95, for years up to June 30, 2004
  • .78, for years after June 30, 2004

19
Early Retirement Example (Contd)
  • Assume pension at normal retirement is 30,000
    and
  • 16 of the 20 years are pre-June 04, and 4 of
    the 20 years are post-June 04

30,000
? Pension payable at age 65
x 0.916
? Adjustment factor
27,480
? Early retirement pension
Calculated as 16/20 x 0.95 plus 4/20 x 0.78
20
Survivorship Benefits
  • EXAMPLE OF JS PENSION
  • Pension of 30,000 per year at time of members
    death
  • Surviving spouse to receive pension of
  • 30,000 x 66 2/3 20,010/ year
  • Type II pension would be reduced at the death of
    either the member or spouse

21
Indexing
  • To maintain the purchasing power of the initial
    pensions
  • Two aspects of indexation at Dalhousie
  • 1) Indexation based on the Excess Interest
    Method (i.e. over 5.05)
  • 2) Discretionary catch-up indexation

22
Indexing (Contd)
  • Excess Interest Indexation equals the lesser
    of
  • 1) Three years average return of the RTF in
    excess of 5.05 and
  • 2) Increase of CPI over the past fiscal year

23
Indexing (Contd)
  • Each January 1st,
  • Initial indexation is the second January
    following retirement and will vary depending on
    the month in which pension payments start
  • Jan - 150
  • Jul 100
  • Dec 58.3

24
Retirement Benefits
  • These options are considered to be retirement
    options which entitle the Member to health,
    dental and tuition fee waiver benefits, subject
    to eligibility rules

25
Deferment
  • Typically chosen if the Member has an alternative
    source of income
  • Entitlement (commuted value) will receive
    investment rate of return on the RTF
  • Maximum deferral period to December 31st of 69th
    birthday

26
Deferment (Contd)
  • Three year weighted average
  • Retirees Trust Fund 10.83 (for 2008)
  • Pension Trust Fund 11.22 (July 1, 2007 to June
    30, 2008)
  • Ultimate pension is limited by CRA maximum
    pension rules

27
Deferment (Contd)
  • Members who terminate at age 55 or older
  • Elect to defer in writing
  • The deferred pension will grow at the rate earned
    by the RTF but will be limited to the maximum
    pension prescribed by the CRA.

28
Deferment (Contd)
  • Members who terminate at less than age 55
  • SOCC will remain in the PTF to be credited with
    interest as earned by the PTF
  • If the member does not transfer out the SOCC by
    the members NRD they will receive a pension
    equal to the amount accrued at date of termination

29
Termination of Employment
  • Deferred vested monthly pension
  • Lump sum transfer value
  • RRSP (any applicable locked-in vehicle)
  • To RRP of new employer
  • Annuity purchase with licensed insurance company

30
Termination of Employment (Contd)
  • Entitled to greater of commuted value or vested
    contributions
  • Withdrawn within one year of normal retirement
    date no longer applies
  • Waiting until normal retirement to transfer funds
    you are deemed to be taking a pension

31
Maximum RRSP Transfer Value
  • Factor of your pension and age
  • Factors
  • Age 50 and under 9
  • Age 65 12.4
  • Age 71 10.3
  • Pension used is unreduced
  • Amount over the transfer max is paid in cash
    (less tax)

32
THE DALHOUSIE UNIVERSITY STAFF PENSION PLAN
Questions and Discussion
  • Pension Plan Information Session
  • May 7, 2008

33
  • SOURCES OF
  • RETIREMENT INCOME

34
SOURCES OF RETIREMENT INCOME
Three Legged Stool
  • Individual
  • RRSPs
  • House
  • Non-registered savings
  • Government
  • CPP
  • OAS (GIS)
  • Employer Sponsored
  • DB Plan (Dals Plan)

35
SOURCES OF RETIREMENT INCOME
  • WHY YOU DONT NEED 100 REPLACEMENT
  • Rule of Thumb
  • Many financial planners say that you will need
    about 70 of your current earnings (gross) to
    maintain your standard of living at retirement

36
SOURCES OF RETIREMENT INCOME
  • WHY YOU DONT NEED 100 REPLACEMENT
  • No work related expenses
  • Fewer deductions from pension cheque
  • Deductions on your tax return
  • House (other assets) paid for?
  • No children to support?

37
SOURCES OF RETIREMENT INCOME
  • CANADA PENSION PLAN (CPP)
  • Contributions on earnings up to YMPE
  • 4.95 of pay up to YMPE
  • YMPE is 42,100 for 2006
  • matched by employer
  • Target Pension at age 65
  • 25 of average indexed earnings up to the YMPE
  • adjusted for periods out of the workforce
  • early reduced pension between 60 and 65
    (maximum reduction of 30)
  • stop work or low earnings
  • fully indexed pension, 60 survivor benefit

38
APPLYING FOR CPP
  • Recommendation is six months before you want your
    pension to start
  • Application kit from HRDC (available through
    website or mail)
  • Must provide
  • certified copy of birth or baptismal certificate
    (if not already submitted)

39
SOURCES OF RETIREMENT INCOME
  • OLD AGE SECURITY (OAS)
  • Universal Benefit
  • residency requirements (40 years pro-rated)
  • paid from General Tax Revenues
  • Payable at age 65
  • January 2006 5,816 per annum, fully indexed
  • OAS clawed back for higher earners
  • Incomes over xx,xxx in 2006
  • GIS may be payable
  • paid subject to income test
  • 50 cent reduction per dollar other income

40
APPLYING FOR OAS
  • Six months before you turn 65
  • Application kit from HRDC (available through
    website or mail)
  • Must provide
  • Birth or baptismal certificate (if not already
    submitted)
  • Citizenship or immigration documents (if not born
    in Canada)
  • Proof of all dates arriving and leaving Canada
    (i.e. passport) if not continuously living in
    Canada since age 18

41
SOURCES OF RETIREMENT INCOME An example
  • Member with 30 years in plan
  • Best average earnings of 60,000

42
SOURCES OF RETIREMENT INCOME (Example contd)
  • Example 1 Retirement at age 60

Reduction factor assumes 28 years of pre-June
04, and 2 years post OAS starts at age 65
43
SOURCES OF RETIREMENT INCOME (Example contd)
  • Example 2 Retirement at age 65

44
SOURCES OF RETIREMENT INCOME
  • INDIVIDUAL SAVINGS
  • RRSPs, House, Non-registered savings
  • Personal RRSPs
  • Tax-sheltered
  • contributions and investment income
  • Eligible contributions to RRSPs
  • 18 of earnings, less Pension Adjustment (PA)
  • PA on your T4 is deemed value of pension benefit
    earned
  • University Plan leaves 600 in room per annum

45
  • More information on government programs is
  • available from
  • Human Resources Development Canada
  • 1-877-454-4051
  • www.hrdc-drhc.gc.ca/isp

46
FYI
  • All of the following slides are from Lees
    presentation

47
RETIREMENT/TERMINATION OPTIONS
RETIRE
RESIGN/ TERMINATE
48
DALHOUSIE PENSION PLAN
  • BENEFIT FORMULA
  • BEST 3 YRS AVG. SALARY x 2 x YRS of MEMBERSHIP
  • MAXIMUM 35 YRS
  • EARLY RETIREMENT PENALTY

49
MAXIMUM PENSION BENEFITS
  • 2005 - MAX. PENSION 70,000/YR, PENSIONABLE
    SALARY 100,000/YR.
  • 2006 - MAX. PENSION 73,885/YR, PENSIONABLE
    SALARY 105,550
  • 2007 - MAX.PENSION 77,770/YR, PENSIONABLE SALARY
    111,100

50
EARLY RETIREMENT BENEFITS
51
NORMAL FORMS OF PENSION
  • TO JUNE 30, 2004
  • LIFE, 10YR GUARANTEE (SINGLE)
  • LIFE , 66 2/3 SURVIVORSHIP , 5YR GUAR (MARRIED)
  • AFTER JUNE 30,2004
  • LIFE, 7YR GUARANTEE (MARRIED AND SINGLE)

52
NORMAL FORMS (Contd)
  • PBA MINIMUM 60 SURVIVORSHIP
  • OTHER OPTIONAL FORMS
  • TYPE II PENSIONS

53
ADVICE FOR NEXT 2 YRS
  • Follow pension plan changes via notice digest,
    etc.
  • Annual estimates
  • Website

54
EARLY RETIREMENT BENEFITS
  • Continuation to Age 65 (10/10/5 Rule)
  • DENTAL PLAN
  • HEALTH PLAN RETIREES PLAN AFTER AGE 65
  • Conversion of optional Group Life
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